Bills Digest 76 1996-97 Private Health Insurance Incentives Bill 1996

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

To establish a scheme under which the private health insurance
premiums of certain individuals are reduced. The policy objective
of the scheme is to stabilise the level of participation in private
health insurance.

In an attempt to stabilise the level of coverage of private
health insurance in Australia, the Government announced in the
Budget a two-pronged strategy which offers means-tested subsidies
for people with private health insurance and a penalty through the
Medicare levy for higher income people without private health
insurance. The incentives element of the strategy is contained in
the Private Health Insurance Incentives Bill 1996,
the Health Legislation Amendment (Private Health Insurance
Incentives) Bill 1996 and the Taxation Laws
Amendment (Private Health Insurance Incentives) Bill 1996.
The Private Health Insurance Incentives Bill provides for payment
of the incentives by way of reduced private health insurance
premiums while the Taxation Laws Amendment (Private Health
Insurance Incentives) Bill provides for payment of the incentives
as a taxation rebate. The penalty element of the strategy is
contained in the Medicare Levy Amendment Bill (No. 2)
1996 and the Taxation Laws Amendment (Private
Health Insurance Incentives) Bill 1996.

Private Health Insurance Incentives Bill 1996

The incentives contained in this Bill were a central feature of
the Government's health policy at the 1996 election. The incentives
represent a substantial departure from previous policy in this
area, successive Labor governments having tended to avoid explicit
subsidies for private health insurance. Several policy decisions
taken during the mid to late 1980s (removal of the bed-day subsidy
for private hospital utilisation; reduction in the Medicare benefit
for in-hospital medical services from 85 per cent to 75 per cent;
and the removal of the reinsurance subsidy arrangements) actually
had the effect of withdrawing subsidies for private health
insurance, amounting to cost shifting from the Commonwealth to the
private health insurance funds and their contributors.

What are the incentives?

Single people with an income of less than $35 000 per year will
receive up to $125 each year towards the cost of their private
health insurance premiums, while couples with a combined income of
less than $70 000 per year will receive up to $250 per year.
Families with one child and an income of less than $70 000 per year
will receive up to $450. The income threshold rises by $3000 for
each additional child (this latter provision was not included in
the Government's election policy). It should be noted that there
are no phasing or 'shade-out' provisions for the income levels at
which the incentive payments cut-out, which will result in high
effective marginal tax rates at these income levels.

People with single memberships will be eligible for a $100 per
year payment for their hospital insurance and a further $25 if they
have ancillary insurance (dental, physiotherapy etc) while people
with couple memberships will be eligible for a $200 per year
payment for their hospital insurance and a further $50 if they have
ancillary cover. Families will be eligible for a $350 per year
payment for their hospital membership and a further $100 if they
have ancillary cover. People can choose to have the money paid
directly to their health fund in return for a guaranteed reduction
in premiums or they may choose to receive the payment as a taxation
rebate after the end of the financial year(1).

It should be noted that the incentive payments are not indexed
and therefore their real value will fall over time, which will be
exacerbated if private health insurance premiums continue to
increase at their current rate. In addition, the income levels
which establish eligibility for the incentive payments are
similarly not indexed, which means that people will lose
entitlements as their incomes increase over time.

The incentives scheme will commence on 1 July 1997.

What are the problems with private health insurance?

Private health insurance is an important component of the
Australian health system, contributing over $4 billion annually to
total health expenditure. However, private health insurance
coverage has steadily declined in Australia since the introduction
of Medicare. At 31 March 1983, following the election of the Hawke
government, 65.8 per cent of the population were covered by private
health insurance. At 31 March 1984, following the commencement of
Medicare on 1 February, the proportion of the population covered by
private health insurance had fallen to 54.9 per cent. By September
1996 this figure had fallen to 33.5 per cent of the population. The
rate of decline appears to have slowed in the latter part of 1996,
with the fall between the June and September quarters of 0.1 per
cent the lowest for six years. The table below indicates the
changes in coverage of private health insurance, by State, since
1984.

(a) ACT population included with NSW. NT
population was included with SA prior to 1995.(b) as at 31 March.(c) September quarter 1996.

Of perhaps more concern for health policy over the longer term
is the trend of people aged 65 years and over to increase as a
percentage of those insured. People in this age group have
increased from 10.2 per cent of those insured in 1989-90 to 14 per
cent in 1995-96.

There are several key reasons behind the decline in private
health insurance coverage. Principal among these is Medicare
itself, a very popular government program which has been widely
embraced by the electorate. Medicare provides subsidised access to
medical and diagnostic services and free access to public hospital
services. Although patients are free to choose their doctor for
out-of-hospital consultations, Medicare does not offer choice of
doctor for public hospital services. Private health insurance funds
are prohibited from providing insurance for medical services (other
than the 25 per cent 'gap' between the Medicare rebate and the
schedule fee for in-hospital procedures), but are able to offer
contributors to hospital insurance choice of doctor and choice of
public or private hospital treatment.

Another major factor behind the decline in private health
insurance membership is the often high level of out-of-pocket
payments for doctor's fees following a hospital episode faced by
contributors to private health insurance. In order to address this
factor, the previous government legislated to permit private health
insurance funds to enter contracts with medical practitioners to
provide 100 per cent cover for their contributors. It is fair to
say that this measure has not been successful, principally due to
concerted opposition from the medical profession.

A third key factor contributing to the decline in private health
insurance membership is the rapidly increasing cost of premiums. In
order to address this factor, the Government has announced its
incentives measures. In addition, the Government has requested the
Productivity Commission to inquire into the private health
insurance industry, in part to investigate the cost pressures on
the industry. The Commission released a draft report on 18 December
1996 and is expected to provide its final report to the Treasurer
by 28 February 1997. In its draft report, the Commission identified
three principal factors behind the increasing premiums for private
health insurance:

a switch in usage from public to private hospitals (partly
policy induced by legislation in 1995 facilitating contracts
between funds and hospitals to provide 100 per cent cover);

an increase in average private hospital charges, partly due to
changes in technology and clinical practice; and

The Commission noted that three policy decisions (discussed
earlier) taken during the Hawke government years (removal of the
bed-day subsidy for private hospital utilisation; reduction in the
Medicare benefit for in-hospital medical services from 85 per cent
to 75 per cent; and the removal of the reinsurance subsidy
arrangements) had contributed to the level of premiums, but argued
that their effect on the growth in premiums was limited to the
period prior to 1989-90 and did not account for the more recent
increases in premiums.

What is the likely impact of the incentives?

In its examination of the Government's incentives measures the
Commission noted that the rebate will increase affordability and
choice but will have a negative budgetary impact because "savings
to Medicare will fall considerably short of the costs of the
rebate"(3). This is because most of the people who will receive the
incentives are already insured and the Commission estimates that
people who take up private health insurance as a result of the
incentives are likely to be lower users of the public health
system.

The Commission has also pointed to the lack of phasing
provisions for the rebate which will result in high effective
marginal tax rates at the income points where the rebate cuts out
and has also noted that the value of the rebates will fall because
of the lack of indexation. The Commission has also proposed that
the administrative arrangements for the rebates be clarified and
that consideration be given to extending the rebate to people who
opt to self-insure, noting that the grounds for excluding them "are
weak and could be re-examined"(4) . The Commission considers that
the rebate would be better confined to hospital insurance only.

Critics of the Government's private health insurance initiatives
argue that they will make little difference to the numbers of
people with private health insurance because the incentives will
offset only a proportion of the cost of premiums. These critics
were given ammunition by several private health insurance funds
which, exhibiting questionable political judgement, announced
premium increases shortly after the Budget. However, there is no
doubt that premiums would have increased in 1996 because of the
deteriorating financial position of the funds, which faced an
overall operating loss of $81.33 million in 1995-96 compared with a
profit of $61.81 million in 1994-95(5). The Productivity Commission
argues that the view that premium increases have devalued the
incentives is misleading because "the rebate still represents a
substantial rate of assistance".(6)

The incentives policy is aimed at low and middle income earners
but leaves itself open to the criticism that it is unfair to
exclude people who opt to self-insure, as well as people with
higher incomes.

Various estimates have been made of the effect of the incentives
measures on participation in private health insurance. The
Department of Health and Family Services has estimated that the
measures will add a one-off increase of about 2 percentage points
to the level of coverage of private health insurance, which will
increase from 32 per cent (expected in July 1997) to 34 per cent.
The rate is expected to then stabilise(7). One of the architects of
Medicare, Dr John Deeble, has estimated that the effect of the
incentives would be to increase participation by up to three per
cent(8). The Productivity Commission has estimated that the total
effect of the Government's measures (incentives and the penalty
Medicare levy) may add some 5.2 percentage points to coverage of
private health insurance. The Commission estimates that this is
likely to be a one-off increase.(9)

Financial impact

The cost of the incentives measures is considerable. It is
estimated by the Department of Health and Family Services that the
total cost of the measures will be approximately $1.7 billion over
four years. This cost includes payments to offset the cost of
health insurance premiums and rebates through the taxation system.
A breakdown of the estimated cost by year is as follows:

1996-97

$8 million

1997-98

$491 million

1998-99

$609 million

1999-2000

$616 million

Medicare Levy Amendment Bill (No. 2) 1996

This Bill implements the second element of the Government's
strategy to at least stabilise the level of coverage of private
health insurance and to perhaps increase participation. The Bill
seeks to impose a one per cent Medicare levy surcharge on
individuals with taxable incomes above $50 000 per year and
families with a combined income greater than $100 000 per year who
do not have private health insurance. This measure will increase
the Medicare levy for those people affected to 2.5 per cent of
their taxable income. The effect of this measure will be that a
single person with a taxable income of $50 000 will pay an extra
$500 through the Medicare levy while a family with an income of
$100 000 will pay an extra $1000 per year if they do not take out
private health insurance. Unlike the incentives measure, the levy
surcharge was not foreshadowed by the Government in its 1996
election policy.

While there is little doubt that this is an electorally popular
measure, questions could possibly be raised about its fairness. For
example, higher income earners face disincentives to self-insure,
are penalised if they do not have private health insurance but at
the same time are ineligible for the incentives measures. The
Productivity Commission has noted that people on higher incomes
already contribute tax transfers which are much greater than other
groups and that the penalty "is effectively a tax on enrolment in
the public system by people who have already contributed to that
system far more than the average taxpayer"(10). For example, in
1992-93, the average Medicare levy paid per taxpayer was $383.49
($461.96 in 1994-95, excluding 'exempt persons') while taxpayers in
the top decile of taxable income ($49 181 and over) paid an average
of $882.29 through the Medicare levy.

The private health insurance industry has lobbied hard for the
adoption of this policy measure over a period of several years,
with its peak body, the Australian Health Insurance Association
(AHIA) taking a high profile on the issue. The issue has received a
considerable amount of attention despite the fact that because
people with higher incomes have a much greater level of
participation in private health insurance than people on lower and
middle incomes, the measure will affect a relatively small number
of people. The table below indicates the percentage of the
population without private health insurance, by income group:

Family Income
$ (p.a.)

Uninsured
%

0 to 9 999

64.8

10 000 to 19 999

76.2

20 000 to 29 999

53.7

30 000 to 39 999

40.8

40 000 to 49 999

32.9

50 000 to 59 999

27.7

60 000 to 69 999

21.6

70 000 or more

16.3

Source: Schofield, D The Distribution and Determinants of
Private Health Insurance in the 1990s, NATSEM, 1996 (incomes
are for 1989/90)

The Department of Health and Family Services estimates that some
110 000 single people and 100 000 couples and families will be
affected by this measure and that around two-thirds of these people
are likely to join private health insurance funds with the
remainder choosing to pay the 1 per cent Medicare levy
surcharge(11).

The income levels at which the penalty levy takes effect are not
indexed and as a result, more people will be affected by this
measure each year as their incomes rise.

This measure will apply from 1 July 1997. Revenue projections
are low, due to the expectation that the majority of people
affected will choose to participate in private health insurance
rather than paying the surcharge. It is estimated that the extra 1
per cent Medicare levy surcharge will raise some $60 million in
1998-99 and $75 million in 1999-2000.

Outline of Main Provisions of Digest

The provisions of this Bill can be broken down into basically
two major parts, namely, provisions dealing with the eligibility of
people to participate in the incentives scheme, or in other words,
eligibility to receive a reduction in insurance premiums in respect
of a private health insurance policy, and those dealing with the
reimbursement of registered health benefits organisations for
reductions they make to insurance premiums under the scheme.

The following main provisions section of this Digest is
structured on this two part division and will outline the main
provisions of the Bill by posing the following questions:

who is and who is not eligible to participate in the incentives
scheme?

how do people participate in the incentives scheme?

by how much are insurance premiums reduced for those eligible
to participate in the incentives scheme?

how and how much will registered health benefits organisations
be reimbursed for reductions they make for insurance premiums under
the incentives scheme?

Who Is And Who Is Not Eligible To Participate In The
IncentivesScheme?

A person will only be eligible to participate in the incentives
scheme and thus receive a reduction in insurance premiums in
respect of a private health insurance policy if:

(1) The registered health benefits organisation
(hereafter called a health fund) that issued the private health
insurance policy (hereafter called a policy) is a 'participating
fund'.

How a health fund becomes a participating fund is specified in
Division 7 of Part 3 of the Bill (subclauses 7-1 to
7-4). Each financial year a health fund will have to apply
to the Minister to become a participating health fund
(subclause 7-1). An application will have to be in
a form determined by the Minister, include such information as is
determined by the Minister, be signed by the public officer of the
applicant health fund and include an undertaking from that officer
that the applicant will participate in the incentives scheme until
the end of the financial year (subclause 7-2). The
Minister must approve an application unless the health fund is
subject to Part VIA of the National Health Act 1953 (ie.
notice has been served on the health fund that it must show grounds
why an inspector should not be appointed, the health fund has
applied for a judicial winding up, or an order for judicial
management is in force), although he or she can still approve the
application if satisfied that it is in the public interest to do
so.

(2) The person is eligible to apply under Division 4 for
registration in respect of a private health insurance
policy.

To be eligible to participate in the incentives scheme a person
must be registered with the Health Insurance Commission (the
Commission). Under subclause 4-2, any person who
is covered by a private health insurance policy for a financial
year (other than a dependent child) is eligible to apply for
registration in respect of the policy. Where a person covered by a
policy is a dependent child at any time during that period, any of
their parents is eligible to apply.

A person will not be eligible to apply for registration in
respect of their policy if someone else has already applied for
registration in respect of that policy and the Commission has not
refused to register that person or revoked their person's
registration. A decision of the Commission refusing to register a
person is reviewable by the Administrative Appeals Tribunal under
subclause 13-1.

Note: The term 'dependent child' is defined to be a person
covered by a private health insurance policy and whom the health
fund accepts as a dependent child for the purposes of the policy. A
dependent child does not include: a person who is the partner of
another person; a person (other than a full-time student) who is 18
or older; or a full-time student over 25.

The term 'parent', in relation to a dependent child, is defined
to mean: a person who has the right, either alone or jointly with
another to have the daily care and control of the child and make
decisions about the daily care and control of the child. If the
dependent child is a full-time student 18 or older, the parent is a
person who is primarily responsible, either alone or jointly with
another, for their maintenance and support.

Each of the above terms is defined in subclause
3-2. A key feature of the definitions of 'hospital cover'
and 'ancillary cover' is a requirement that the policy be of a
specified minimum value. In other words, a person will not be
eligible to participate in the incentives scheme unless they
purchase a policy with an annual premium at or above the specified
levels.

In respect to 'hospital cover', the annual premium payable for a
policy where it covers only one person must not be less than $250,
or an amount determined by the Minister. In the case of a policy
which covers more than one person, the annual premium payable must
not be less than $500, or an amount determined by the Minister.

In respect to 'ancillary cover', the annual premium payable for
a policy where it cover only one person, must not be less than
$125, or an amount determined by the Minister. In the case of a
policy which covers more than one person, the annual premium
payable must not be less than $250, or an amount determined by the
Minister.

A policy provides 'combined cover' where it provides both
hospital and ancillary cover. Ministerial determinations as to the
minimum annual premium payable for a policy will be subject to
disallowance by the Parliament.

(4) The income test is satisfied.

The provisions dealing with the income test which must be
satisfied in order for a person to be eligible for a reduction in
private health insurance premium are contained in
subclauses 3-3 and 3-4.

Subclause 3-3 deals with the income test for
policies covering one person in respect of a financial year. The
income test will be satisfied if:

the sum of the taxable incomes of the following persons:

if the person covered by the policy is not a dependent child,
that person and their partner (if any); or

if the person covered by the policy is a dependent child, any
parent of theirs, and the partner (if any) of the parent, but only
if the parent or their partner made one or more payments of
premiums, or another person made one or more such payments under an
arrangement entered into with the parent or partner;

is less than:

$35 000 where the person covered by the policy is not a
dependent child and is not the partner of another person;

$70 000 where the person covered by the policy is not a
dependent child and is the partner of another person; or

$70 000 where the person covered by the policy is a dependent
child.

The term 'partner' in relation to another person is defined to
mean: a person who is legally married to the other person and is
not living separately and apart from the other person on a
permanent basis; or a person who, although not legally married to
the other person, lives with the other person on a bona fide
domestic basis as the husband or wife of the other person.

Subclause 3-4 deals with the income test for
policies covering more than one person in respect of a financial
year. The income test will be satisfied if:

the sum of the taxable incomes of the following persons:

each person covered by the policy who is not a dependent child;
and

the partner (if any) of each such person; and

if all the persons covered by the policy are dependent
children, any parent of any of them, and the partner (if any) of
the parent, but only if the parent, or their partner, made one or
more payments of premiums, or another person made one or more such
payments under an arrangement entered into with the parent or
partner;

is less than:

$70 000, where the persons covered by the policy does not
include 2 or more dependent children; or

$70 000, plus $3 000 multiplied by the number of dependent
children minus 1 dependent child (eg. if a policy covers a family
that has four dependent children, the income calculation would be
$70 000 plus $3 000 multiplied by 4 children minus 1 child, which
gives an income threshold of $79 000).

(5) An eligible person within the meaning of sections 3
and 6 of the Health Insurance Act 1973.

Section 3 of the Health Insurance Act 1973 defines the
term 'eligible person' to mean an Australian resident or an
eligible overseas representative. Section 6 of the Act provides the
Minister with power to declare a specified person, or persons
included in a specified class of persons, as having been or as
being an eligible person for the purposes of the Act. The term is
important because it is a condition of qualifying for a Medicare
benefit that a person be an eligible person.

How Do People Participate In The Incentives Scheme?

To participate in the incentives scheme people must be
registered with the Commission. Under subclause
4-1, persons who are eligible to apply for registration in
respect of a policy may apply to the health fund that issued the
policy to be registered by the Commission in respect of their
policy. Where a health fund receives an application for
registration, it must notify the Commission of the application.
Where the Commission receives notice of an application, it must
register the person unless satisfied the person is not eligible to
participate in the incentives scheme, or information contained in
the notice is incorrect.

In respect to eligibility to apply for registration, under
subclause 4-2 any person who is covered by a
policy for a financial year (other than a dependent child) is
eligible to apply for registration. Where every person covered by
the policy is a dependent child at any time during that period, any
of their parents is eligible to apply. A person will be ineligible
to apply for registration if someone else has already applied for
registration in respect of the policy and the Commission has not
refused to register that person or revoked their registration.

In respect to applications for registration, subclause
4-3 sets out the requirements. These include that the
application be in a form approved by the Minister and contain a
statutory declaration that the applicant has estimated the sum of
taxable incomes for that financial year for all people that must be
taken into account under the income test provisions of the
incentives scheme, and the applicant believes he or she will be
eligible to participate in the incentives scheme for that year. An
application must contain certain details, including: the
applicant's full name, date of birth and address; the applicant's
Medicare card number; and any other information determined by the
Minister. The power of the Minister to determined what other
information must be contained in an application expressly does not
include the power to specify the disclosure of a persons tax file
number, or any other information about the applicant's income, or
income of any other person, other than that the applicant believes
the incentive scheme's income test is satisfied in respect of their
policy.

In respect to notifying the Commission of an application,
subclause 4-4 sets out the process and
requirements which a health fund must follow. Significant
requirements imposed on health funds by this subclause include a
requirement that:

the Commission be notified of applications received on or
before the 21st day of a month no later than the first business day
of the following month, or where an application is received on or
after the 22nd day of a month, the first business day of the second
month after the day on which the application was made; and

the notice of receipt of an application contain such details as
the Managing Director of the Commission determines (determinations
are subject to disallowance by Parliament).

Where the Commission refuses to register an applicant notice and
reasons for a refusal must be given to the applicant and the health
fund that issued the policy (subclause 4-5).

The Commission must revoke a person's registration in the
following circumstances:

the person becomes registered for another policy;

the Commission has been given notice by the health fund that
the estimated sum of the taxable incomes of persons whose income
must be taken into account under the incentive scheme's income test
for that year changes and to such an extent that the person knows
or ought reasonably to expect that the income test will not be
satisfied; or

the Commission is satisfied that the person is not eligible to
participate in the incentives scheme for that year
(subclause 4-6).

A decision of the Commission to revoke a person's registration
is reviewable by the Administrative Appeals Tribunal under
subclause 13-1.

Registered persons must notify the health fund with whom they
hold a policy of the following events:

where they know or ought reasonably to have expected that they
will not satisfy the incentive scheme's income test; and

of changes in their application for registration and relating
to the number of people covered by the policy, or to whether any of
those people are dependent children which they ought reasonably to
expect would affect the annual incentive amount for their policy
for the relevant year (subclause 4-7).

In turn, a health fund must notify the Commission of the above
information (subclause 4-8).

Subclause 4-10 deals with the retention of
applications for registration. Applications must be kept by a
health fund for five years. Applications may be kept in any form
approved by the Managing Director of the Commission and an
application retained in an approved form must be received in all
courts and tribunals as the original.

By How Much Are Insurance Premiums Reduced For Those Eligible To
Participate In The Incentives Scheme?

The provisions of the Bill which specify by how much insurance
premiums are to be reduced for eligible participants in the
incentives scheme are set out in division 5 (clauses 5-1 to
5-6).

The amounts by which a health fund must reduce the premiums
payable on a policy are set out in the table to subclause
5-3. These amounts (called annual incentive amounts)
are:

Where the policy covers one person: $125 where the policy
provides combined cover, $100 where the policy provides hospital
cover but not ancillary cover, or $25 where the policy provides
ancillary cover but not hospital cover.

Where the policy covers two people neither of whom are
dependent children: $250 where the policy provides combined cover,
$200 where the policy provides hospital cover but not ancillary
cover, or $50 where the policy provides ancillary cover but not
hospital cover.

Where the policy covers one dependent child and one other
person: $450 where the policy provides combined cover, $350 where
the policy provides hospital cover but not ancillary cover, or $100
where the policy provides ancillary cover but not hospital
cover.

Where the policy covers three or more people: $450 where the
policy provides combined cover, $350 where the policy provides
hospital cover but not ancillary cover, or $100 where the policy
provides ancillary cover but not hospital cover.

Subclause 5-3 also provides the Minister,
subject to disallowance by Parliament, with the power to determine
incentive amounts other than those specified above.

Reductions in premiums are pro-rata'd, under subclause
5-1, according to the period for which the policy holder
pays for the policy.

How And How Much Will Registered Health Benefits Organisations
Be Reimbursed For Reductions They Make For Insurance Premiums Under
The Incentives Scheme?

Division 8 (subclauses 8-1 to 8-6) of the Bill
deals with how health funds are reimbursed by the Commission for
reducing premiums under the incentives scheme. In order to be
reimbursed a health fund must make a claim for reimbursement to the
Commission. Requirements for a claim for reimbursement are
specified in subclause 8-2 and include:

such details as the Managing Director of the Commission
determines. Such determinations are subject to disallowance by
Parliament; and

details about policies in respect of which persons were
participants in the incentives scheme.

Health funds may make claims for reimbursement for each month
they are a participating fund (subclause 8-1).
Under subclause 8-3, the amount payable to a
health fund in respect of a month is one twelfth the sum of the
annual incentive amount for each policy they issue and which on the
first day of that month covers a person who is a participant in the
incentives scheme.

For the purposes of the above calculation, the annual incentive
for a policy is the amount that would be the annual incentive
amount if those covered by the relevant policy and the number of
those who are dependent children were as stated in the most recent
application for registration. This formula will only apply if the
amount worked out using it is less than the annual incentive amount
under subclause 5-3.

Notice and reasons must be given by the Commission where it
decides not to reimburse a health fund in respect of a policy
(subclause 8-4). A two tier review process is
provided by the Bill in respect to such decisions. First, an
internal review process under subclause 8-5.
Secondly, review by the Administrative Appeals Tribunal under
subclause 13-1.

General Administrative Provisions

Divisions 10-13 (subclauses 10-1 to 13-4) deal
primarily with the administration of the incentives scheme. In
particular, they deal with the auditing of health funds, recovery
of payments and protection of personal information.

The Commission is accorded a power under subclause
10-2 to audit, at any time, the accounts and records of a
participating fund. Such an audit must relate only to accounts and
records dealing with participation by persons in the incentives
scheme, reductions of premiums payable, or reimbursement from the
Commission. Notice must be given to a health fund that an audit is
to be carried out. Health funds must ensure that the Commission has
full and free access to all accounts, records, documents and papers
relevant to the audit.

Clause 10-4 requires the Commission, within 60
days of the end of each financial year, to provide the Commissioner
of Taxation with certain information, including:

the name, date of birth and address of each person who was a
participant in the incentives scheme for that financial year;

the name of the health fund that issued the policy for a person
who was a participant in the incentives scheme;

the type of cover provided by a policy;

the total amount of payments to a health fund for a policy;
and

the name and date of birth of any person whose income was taken
into account in determining whether the incentives scheme's income
test was satisfied for that policy.

Subclause 11-1 deals with the recovery of
payments made under the incentives scheme. The following payments
made under the incentives scheme are recoverable by the
Commonwealth:

Payments made to a health fund as a reimbursement in respect of
a policy that covers a person who was a participant in the
incentives scheme and not eligible to so participate. Such payments
are recoverable from the participant or their estate.

150% of payments made to a health fund as a reimbursement in
respect of a policy which is not reflected in reductions in
premiums.

150% of payments made to a health fund as a reimbursement in
respect of a person whose application for registration has not been
kept by the health fund.

150% of payments made to a health fund as a reimbursement in
respect of a person whose application for registration has been
kept but not provided to the Commission as required under subclause
10-3.

Payments purportedly made to a health fund as a reimbursement
but were not payable.

The latter four payments are recoverable from the health fund to
which the payment in question was made.

Where the Managing Director of the Commission has served a
notice on a person or their estate for the recovery of a payment,
and:

within 3 months of service of the notice, or such period as the
Director allows, an arrangement for repayment has been entered into
between Director and the person or estate for repayment and the
person or estate has defaulted under the arrangement; or

within 3 months of service of the notice, or such period as the
Director allows, an arrangement has not be entered into between the
Director and person or estate for repayment and all or part of the
amount to be repaid remains unpaid;

interest is payable on the amount to be repaid at a rate of 15%
per annum or rate specified in the regulations (subclause
11-2).

The Managing Director of the Commission is given a discretion
under subclause 11-3 to waive, in whole or in
part, or allow payment in specified instalments of an amount
recoverable. A decision of the Director not to exercise his or her
discretion is reviewable by the Administrative Appeals Tribunal
under subclause 13-1.

Division 12 (subclauses 12-1 to 12-2) deals
with the regulation of personal information under the Bill.
Subclause 12-1 allows the Minister, subject to
disallowance by Parliament, to make principles, which health funds
must comply with, relating to the acquisition of personal
information under the Bill and the storage of, security of, access
to, correction of, use of and disclosure of such information.
Subclause 12-2 makes it an offence, punishable by
a maximum fine of 5 penalty units ($500) for a person who uses,
makes a record of or discloses or communicates to any person any
information relating to the affairs of another person that was
acquired under or for the purposes of this Bill. No offence will
have been committed if the conduct was carried out in performance
of a function or obligation under this Bill.

24 January 1997
Bills Digest Service
Information and Research Services

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Published by the Department of the Parliamentary Library,
1997.

This page was prepared by the Parliamentary Library,
Commonwealth of Australia
Last updated: 29 April 1997